Judge narrows Fannie/Freddie lawsuit against Barclays

NEW YORK, Nov 19 (Reuters) - A U.S. judge on Monday pareddown a federal regulator's lawsuit accusing Barclays Plc of misleading Fannie Mae and Freddie Mac, which boughtrisky mortgage debt worth billions of dollars between October2005 and February 2007.

Judge Denise Cote of U.S. District Court in Manhattandismissed some claims based on state securities law in thelawsuit b y the Federal Housing Finance Agency, which has suedBarclays over the purchase of $4.9 billion in mortgage-backedsecurities.

But the judge said the lawsuit could move forward underother claims, including federal securities law violations.

Both Stefanie Johnson, a spokeswoman for the FHFA, andBrandon Ashcraft, a spokesman for Barclays, declined to comment.

The case is one of 18 the FHFA, as conservator of Fannie andFreddie, filed last year against various banks over purchases ofsubprime and other residential-mortgage-backed securities.

Many of Barclays' arguments to dismiss the case were similarto those by other banks. But Cote said Barclays had presentedone argument not previously addressed in her decisions.

Barclays had argued that a Barclays-owned entity andindividual defendants couldn't be held liable under the VirginiaSecurities Act for misstatements about securities they didn'tthemselves sell to Fannie and Freddie.

Cote agreed, finding that Virginia had sought to ensure thatliability under its securities law was more limited than underfederal law.

The case is Federal Housing Finance Agency v. Barclays BankPLC, U.S. District Court, Southern District of New York,11-cv-06190.